Airlines: Why a Post COVID-19 Strategy Needs Creativity
The economic uncertainty, over 30 external uncontrollable variables and the unique dynamics of the current COVID-19 crisis make it very challenging for airlines and airports across the globe to forecast demand and kickstart air travel in the near future.
Image: Internal and External Variables Impacting Demand for Air Travel Post COVID-19
Following almost three months of lockdown, the airline industry is preparing for a gradual restart, mostly within domestic markets and to low-risk neighbouring countries initially (e.g. through the establishment of safe air travel bubbles). However, there are many other uncertainties regarding the extent of travel demand and fast-changing consumer behaviour (e.g. health-conscious) in the restart period.
According to IATA (2020), the change in passenger booking behaviour creates additional uncertainty. During the recovery phase over there in China, more passengers are booking their domestic travel within three days prior to departure (61% of existing bookings), compared with 46% a year ago. The recent shift in booking patterns could be caused and triggered by various events including:
- Close monitoring of COVID-19 situation at destination
- Passengers do worry about their flight being cancelled due to poor load factor or any other
operational issues (irregularity in scheduling)
- Sharp decline in fares (demand stimulation technique applied by airlines) leads to more
flexibility for passengers to make a last minute decision and book late
- Passengers are less concerned than usual about the availability of seats and waiting for
last days to book
- Regular unavailability of airlines’ call and service centres (calls & e-mails), causing
passengers’ feeling insecure to book flights in advance
- Few airlines’ poor attention towards health safety-related issues, leading to a delay in the
decision-making process (e.g. choosing airline & routing)
History provides very limited advice to airlines how the recovery will occur in many parts of the world. The challenge of comparison is the current scale and the unique dynamics of this pandemic and the damage wrought by a recession. Therefore, the internal and external variables have to be considered in any forecasting activities of airlines (e.g. Revenue Management, Pricing, Network & Fleet Planning).
The Urgent Call for Action
The above-mentioned inherent uncertainty levels that are synonymous with current times has let a wide array of airlines struggling to navigate through uncharted territories. As a result of these events, there is an urgent and existential call for action across the entire value chain of the airline sector, of which must be founded on the basis of strategic creativity, prioritising human health factors, sustainability and profitability all in tandem (Bauer and Bloch, 2020).
With respect to the change in customer behaviours and network dynamics in the post COVID-19 era, airlines have to reshuffle their strategies and business model by exploring new opportunities. The current crisis has provided the foundations for a range of new blue ocean opportunities where airlines can create demand rather than fight over what exists already (red ocean). In other words, game-changing strategies are born of creative thinking: a spark of intuition, a connection between different ways of thinking, and a leap into the unexpected. These strategies will not only need to pursue a new angle to product differentiation or price leadership for a given market. They will also instills confidence back into the base of airline passengers and stakeholders alike. Thus, it will compromise any new venture’s ability to succeed in a post pandemic world (Bauer and Bloch, 2020).
4Cs for a Breakthrough Strategy
There is a “4 Cs approach” to building a breakthrough strategy and exploring a wide range of possibilities (Brandenburger, 2019):
1.) Contrast: The assumptions undergirding the airline’s or the airline industry’s status quo should be identified by the strategists of any airlines.
2.) Combination: Many smart business moves come from linking products or services that seems independent from or even in tension with one another.
3.) Constrain: A good strategist looks at an airline organisation’s limitations and considers how weaknesses might actually become strengths.
4.) Context: If an airline reflect on how a problem similar to theirs was solved in an entirely different context, surprising insights may emerge afterwards.
In general, strategy is still about finding various ways to create and claim value through differentiation. Applying design-thinking methods and tools that can help identify surprising, creative breaks from conventional thinking are required. However, it also requires tools for analysing the competitive landscape of the airline industry, the dynamics threatening that landscape, and an airline’s resources and competencies. Taking the inspiration more from how strategists’ thought processes work than from how the airline industry or business models are structured can help strategists make the creative leap beyond what already exists. It leads to inventing a genuinely new way of doing business in a post COVID-19 era. Simply waiting for any inspirations to strike is not the right answer during these challenging times.
Author: Linus Benjamin Bauer, Managing Consultant at Bauer Aviation Advisory and Visting Lecturer in Air Transport Management at City University of London